Home / Hard Money Lending / WILL REAL ESTATE PRICES PLUMMET IN 2020? #16


Bill Fairman (00:04):

Hi everyone. Bill Fairman here with Carolina Capital Management. Thank you so much for joining us on the show today. I want you to please like and share us with your friends and get the word out. We also have archive videos. They are either going to be at the top of the page, at the side of the page, or the bottom of the page, depending on what platform you are on. So, another frequently asked question that we get is about the market. You know, they want us to use our crystal ball. You know, I have been in the business for 30 years. None of us know what is going to happen, but you need to prepare yourself for the worst. You always need to look at what is the worst thing that can happen. And one of the things that are true, actually, there is two things that people need. And I always say the same thing over and over again.

Bill Fairman (00:59):

In any economy, people need two things. They need food and they need shelter. And when you are in the real estate game, whether you are fixing and flipping or whether you are buying and holding, or investing in multifamily, or investing in commercial property for that matter, you are always looking at what would be the most liquid of the groups of real estate and what would be the most valued by the most people. So if you are looking at the luxury market, there is only so many people that can afford to buy a luxury home. And when the economy, those take a dip, you know, obviously those luxury homes lose a lot of value because you are limiting who can buy them from you when you sell them. At the same time, commercial properties are very similar. If you have a, what we call a special purpose or a single purpose type of a property. And I will give you an example.

Bill Fairman (02:02):

A drive-up a fast food restaurant, like a Sonic for example. I mean, what else does that property going to be if that Sonic goes out of business? You are going to have to do major remodeling. You are probably going to have to knock it down and put up some other type of structure. Again, you are limiting who is going to be interested in buying that. So not only are you going to have to discount the price quite a bit, to unloaded it quickly, but you are going to have to hold onto it for quite a bit of time without getting any income on them. So this is why I have always tried to focus on the affordable housing market. Now, every market is a little bit different, but in our area, in the Southeast, you are single family, you are looking at, you know, around 300,000 or under, that is going to be your affordable housing market.

Bill Fairman (02:57):

And then in your multifamily space, you are looking for units, you know, one, two, three bedroom units that are going to be somewhere in the 150,000 per unit or under in a price range. And why is that? Well, as markets go up, people in the rental space are going to want to start buying homes. And they are going to be buying homes that are, you are going to have to be in the lower price range because if you have been renting you typically, while your payments are gonna be lower, you typically do not have a down payment or at least a high enough one and you can still get down payment assistance and still be in, you know, affordable spot with the single family homes. As the economy starts to go down, economies are going to do that, I mean everything is circular. And eventually, you know, right now we are doing well, I expect us to do well for going forward.

Bill Fairman (04:02):

But you know, you are going to have a downturn and you could always have what is called a Black Swan Event, some kind of political unrest or something that causes a downturn in the economy. But that said, you are going to capture people on their way down from the luxury market and times that are tougher and you are going to capture people going up that are improving in up markets. And that affordable housing space is always going to be full. Same thing with self storage. It is kind of a hedge against itself. You are capturing people on the way up. They are buying more than they should because we are very, our consumer economy is we keep buying stuff and we have self storage places because we run out of place to put our stuff. We do not want to get rid of it. So as people are moving their way up, they are filling up these self storage units. The other is true when the economy goes down and you are having to downsize. You are getting these units to store stuff that is not going to be able to fit in your new, smaller house.

Bill Fairman (05:16):

I laugh about that because I have a storage unit myself. We talk about $500 worth of stuff that most people keep in a storage unit for three or four years paying, you know, $100 a month for their $500 worth of stuff. But my $500 worth of stuff, it was really special. It has to be in a heating and air conditioned space. So I pay more for it. But my $500 worth of stuff is nice and comfy in all temperatures. So again, no matter what industry or what space you are in, whether it is rental or fix or flip, you want to just concentrate in the affordable housing space and you do not have to worry about booms or busts that you are going to go through. Your downside is much lower than it would be in some of these other spaces. Okay. So, thanks again for joining us. Do not forget to like and share, we have a video archives again in different places above, below, or beside of us, depending on what platform. Have a great day. Bill Fairman, Carolina Capital management.

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